SCG-v: SelectCore

Q1 showed increased sales of 20.7 million vs 18.2 last year. However gross margins continued to contract at .0524 vs .058. The big difference was the fees and charges for the line of credit and term loan. The company had to issue 4 million shares and pay cash loan fees totaling 716K, which was almost all of the loss of 737K.
Last year, SCG showed profits in Q2 and Q3. There could be some seasonality to their business that affects margins positively during those two qtrs. We will find out in a couple of months.
SCG has introduced several new products that may take time to gain traction in the marketplace. Because of the high volume/low margin business model, the initial stages of selling a new product are likely loss generators. We need to see more sales that move these new products past breakeven and an overall return to profitability. Based on Q1, they are close to breakeven and need improvements in gross margins to move back into the better numbers we saw mid last year. Of course, they will have tougher comparables in Q2 and Q3 so they will have to do better to impress.
There was the first sign of a currency loss this qtr. I am worried about any advances into the US without some form of currency protection. No hint in the PR about that.
Overall slightly disappointing. The loan fee costs are somewhat unavoidable and probably put a cap on future price rallies as the lender will likely be selling into any good rallies with the 4 million shares. SCG needs to have their new products generate meaningful sales and improve gross margins. We will have to wait for Q2 to see signs of improvement.

ok, I chased it a bit today and am done buying SCG.v. Even at .07, SCG is selling at less than 3X fwd eps. Company is profitable, just launched a nice prepaid Mastercard product in 4,000 retail locations and is looking to expand to the US.

added more SCG.v today at .05. Dirt cheap and growing in sales and eps. Selling at a fwd p/e of 2 with a big new retailers selling prepaid minutes. Should have a positive Q4. Will be awhile for 2009 financials but like this company in a tough economic environment.

Q3 came out today and they have did over $500K in earnings and that was on top of the $300K they did in q2 ... going forward they look to continue the revenue/earning.
SelectCore is in the business of providing prepaid telecom and transaction-based POSA (point of sale activation) solutions utilizing its own network infrastructure and proprietary technology
I have been buying in the .045 to .06 cent range as it appears very undervalued to me.

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